Economic destiny largely lies in New Zealand's hands

Release date

01 February 2013

Improving New Zealand's
productivity and competitiveness is critical to our economic prosperity, the
Governor of the Reserve Bank said today.

In a speech to the
Canterbury Employers' Chamber of Commerce in Christchurch, Mr Wheeler said
there is no easy formula for boosting economic growth rates. Like other small,
commodity-producing economies, New Zealand's economic prospects depend
greatly on the growth in world output and trade.

But Mr Wheeler said there are ways to build prosperity
in the longer term, and the Reserve Bank is committed to helping cement the
foundations for this growth.

As well as ensuring price stability and reducing the risk of inflation
surprises, the Bank is strengthening financial sector regulation and supervision
to promote a stable and efficient financial system.

Strong international demand for New Zealand's commodity exports will
also help to build prosperity. However, we need more investment to help with job
creation and market development.

"Instead of welcoming foreign investment, we have one of the more
restrictive frameworks among OECD countries. We should re-examine the factors,
including tax and regulation, that diminish and distort the incentives to both
save and invest," he said.

Mr Wheeler said returning to fiscal surplus and lowering public sector
indebtedness will also strengthen the economy's resilience and create more
room for responding to future economic shocks.

Improving education and employment outcomes, especially for Maori and Pacific
Islanders, will also help to strengthen New Zealand's skill base, improve
productivity, and reduce inequality.

"We've much to do in continuing to build our global linkages and
addressing government spending and regulatory issues that diminish productivity
and competitiveness. But addressing these will create valuable payoffs for our
future given our major resource endowments, our impressive agricultural and
primary production engine, and the potential in our education, tourism and other
sectors."

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